Nov. 5 (Bloomberg) -- BHP Billiton Ltd. may find Canada’s
political climate too hostile to overturn the rejection of its
$40 billion bid for Potash Corp. of Saskatchewan Inc. should it
choose to appeal the decision.

“It seems highly unlikely that this is some sort of
bargaining position that they are willing to change,” said
Jonathan Malloy, a professor of political science at Carleton
University in Ottawa. “This government does not change its
mind.”

Industry Minister Tony Clement on Nov. 3 rejected the offer
from Melbourne-based BHP, the world’s largest mining company,
saying the proposal doesn’t provide a “net benefit” to Canada.
Under Canadian law, BHP has 30 days from the ruling to appeal.
Clement’s decision was only the nation’s second rejection of a
foreign takeover in the past 25 years.

Saskatchewan Premier Brad Wall, who threatened to take the
federal government to court if it allowed the bid to proceed,
said in a Bloomberg interview “we have to say no to takeovers
that have very strategic implications and that point is
insurmountable.” Opposition leaders such as Jack Layton of the
New Democrats said they welcomed the move. Even some Potash
Corp. investors, including Stephen Jarislowsky, who held 2.9
percent of the shares as of Sept. 30, had spoken out against the
transaction.

“It’s the right decision for Canada and for Canadians, and
so I stand by the decision,” Clement said in an interview at
Parliament yesterday, adding he’s open to meeting BHP.

First Move

Clement said he’ll meet the company if it makes the first
move. “Should BHP wish this to happen, we would schedule a
meeting between them and my officials to actually discuss what
particular aspects of the net benefit to Canada test were not
successful.” BHP wouldn’t know from the notice he sent the
company why the bid was blocked, said Clement, 49.

“BHP will continue to engage with the minister and the
investment review division of Investment Canada and will review
its options,” Ruban Yogarajah, a London-based spokesman for
BHP, said yesterday by telephone.

Potash Corp. fell 91 cents to $141.06 at 4:15 p.m. in New
York Stock Exchange composite trading. The Saskatoon,
Saskatchewan-based company gained 30 percent this year, 8.5
percent more than BHP’s offer of $130 a share.

Prime Minister Stephen Harper told lawmakers he wanted to
“congratulate” Clement for “taking a decision that is clearly
in the best interests of the Canadian economy.” Speaking in the
House of Commons, the Conservative leader said “this was a rare
case where even a large number, if not most, of the people in
favor of foreign investment opposed this decision.”

‘Enormous Negative’

“What benefit does BHP bring to these potash mines?
None,” said Jarislowsky, who manages about C$44 billion for
pension funds and private investors at Montreal-based
Jarislowsky Fraser Ltd., in a Sept. 23 interview. “From the
point of view of the country, it’s an enormous negative.”

Morgan Stanley analysts led by Melbourne-based Craig
Campbell said in a report the chances of an appeal succeeding
are “very low as it would be an abrupt about-face for Canada’s
ruling party.”

The initial rejection from Canada is likely to increase
pressure on BHP to return excess cash to shareholders, Morgan
Stanley said in the report. BHP could return as much as $4.54 a
share in addition to Morgan Stanley’s 2011 dividend forecast of
90 cents a share, it said.

Voter Concern

“The large majority of my constituents were asking us to
reject the bid from BHP and I passed that directly along to the
minister,” Saskatchewan Conservative lawmaker Tom Lukiwski said
in an interview yesterday.

Lukiwski said he and the other Conservative members from
the province met several times with Clement in the days before
the decision was announced and he’s “confident” Clement took
the lawmakers’ opinions into account.

Harper’s Conservatives hold 13 of 14 electoral districts in
Saskatchewan, a province of about 1 million people north of
Montana with an economy reliant on natural resources. Any loss
there would take Harper further away from a parliamentary
majority, which has eluded him in two prior elections. The party
holds 142 of the 308 seats in the House of Commons, 12 short of
a majority.

‘Forbidden’

Clement said he is “forbidden” by law to publicly state
the detailed reasons for the rejection until the appeal period
is over. “I will do so with alacrity at that moment,” he said.

The New Democrats’ Layton asked Harper in Parliament if he
would change the “culture of secrecy” surrounding Canada’s
foreign-investment laws. Harper replied that “the act should be
reviewed.”

“BHP may look to make larger concessions to appease these
concerns,” London-based UBS AG analyst Olivia Ker wrote in a
Nov. 3 report. “However, our concern is that this is highly
politicized and there may be limited recourse for BHP.”